January is normally a quiet month for dealmaking in Brazil as executives collapse on a beach somewhere for their long summer holiday between Christmas and Carnival. However, that could all change this year as bankers push ahead with the next stage of the telecoms market’s consolidation.
Late on Thursday, the Brazilian mobile phone operator Oi finally got approval from its merger partner Portugal Telecom to sell the Portuguese company’s assets to France’s Altice. (Altice agreed to the €7.4bn acquisition in November but minority shareholders had threatened to sabotage the deal.) Read more
Emerging Asia is set to be the world’s fastest-growing region again in 2015, skirting the contagion from Russia’s crisis and riding the fall-out from weak commodity prices, according to Fitch, the credit rating agency. Nevertheless, structural frailties stalk seven out of 10 countries in the region, with surging debt levels a particular concern, the agency said.
The region, excluding China, is expected to expand by 5.9 per cent in 2015 and 6.1 per cent in 2016 – compared to an average for global emerging markets of 4.1 per cent and 4.5 per cent respectively, Fitch said in a report. These forecasts compare with the International Monetary Fund’s (IMF) estimates that developing economies would this year grow at 4.3 per cent, accelerating to 4.7 per cent in 2016. Read more
By Tony Elumelu of Heirs Holdings
This week, world leaders from the public and private sectors, civil society and academia are gathered at Davos to discuss a “new global context” – the theme of the World Economic Forum’s 2015 annual meeting. In this new context, the WEF fears that profound transformations – social, economic, political and technological – are hastening the end of “economic integration and international partnership”. Read more
** FT News **
* Euro falls to fresh 11-year lows | European stocks also open higher a day after the ECB unleashes QE
* Brazil minister warns of austerity | Joaquim Levy says cuts need to be made to get government finances in order Read more
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By Timothy Ash of Standard Bank
While we all enjoy the ECB-inspired feeding frenzy across all risk assets this week it might be well to remember why Mario Draghi opted for yet another extraordinary measure in line with the message that he will do “whatever it takes”. Indeed, it is perhaps a reflection of the immense challenges facing Europe that he is betting the bank and, especially, other peoples’ (Germans’) money. Europe is in the worst state it has been in at any point in the entire post WWII era. Read more
** FT News **
* King Abdullah dies and Salman ascends | Continuity assured as Crown Prince succeeds brother to the throne
* Oil drop ‘disastrous’ for anti-Isis fight | West offers military aid at UK talks to help Iraq combat jihadis and budget crisis Read more
Evo Morales was sworn in for his third consecutive term as president of Bolivia on Thursday. Before that, on Wednesday, he turned up for an indigenous ceremonial inauguration at the pre-Inca ruins of Tiwanaku wearing an outfit engraved with the sun god, worthy of an emperor. The symbolism was fitting: Bolivia’s longest-serving leader has not only championed indigenous rights but also managed to enrich one of Latin America’s poorest countries.
But the man who is arguably the world’s most successful socialist will face a tough time in his third term, as plunging global oil prices slash the country’s key earnings from natural gas. Read more
Investors are often known to buy on the rumour and sell on the fact but on Thursday, following the announcement of the European Central Bank’s €60bn-a-month asset-buying programme, they carried right on buying.
That’s true, at least, of central and eastern European currencies, if you measure them against the freshly-weakened euro. Read more
Economic slowdowns in Macau and China have driven headlines recently, but a new report by the Brookings Institute ranks Macau as the top economically performing metropolitan area in the world for 2014, followed by four Chinese cities in the top 10 and 11 in the top 20.
Macau’s casino industry took a hit over the second half of 2014, due mainly to a Chinese crackdown on corruption and graft that has reduced the number of VIP high-rollers travelling to Macau from the mainland. In December, gambling revenues hit their lowest point since 2011, and for the whole year, the industry recorded its first ever year-on-year decline – much to the dismay of casino and junket operators. Read more
** FT News **
* Stocks supported by ECB QE optimism | Gold and bond prices fall as haven demand wanes
* Tensions build ahead of ECB launch | French finance minister expresses frustration at Germany Read more
After building expectations for so long, it will come as a disappointment today if the Eureopean Central Bank does not promise to buy (or have others buy) €50bn’s worth of assets every month for at least the next year.
Assuming Mario Draghi delivers as hoped, what will it mean for EM? Will ECB QE pick up where the US Federal Reserve’s variety left off, floating EM asset prices once again? Beyondbrics has been asking around. Read more
** FT News **
* Brazil benchmark rate at three-year high | Central bank’s move comes as government struggles to rebuild trust in stagnant economy
* Ukraine seeks larger IMF bailout deal | Country to launch consultations with sovereign bond holders as it hints at debt restructuring Read more
There are very few things on which economists overwhelmingly agree: free trade and apple pie are about it. But almost all of them will say that across-the-board subsidies for households and companies to lower the price of fuel are a terrible idea.
While advanced economies in general tax fossil fuels – or the carbon emissions that emanate from its use – emerging markets are still big users of subsidies and price caps. The IMF estimates that consumption of petroleum, electricity, natural gas and coal were subsidised by about 2 per cent of total government revenue in 2011 – and much more if compared to a hypothetical efficient tax system. Hydrocarbon exporters accounted for about two-thirds of the total. The subsidy of fossil fuels by oil producers and particularly within the Middle East and North Africa is extreme. Read more
By Robert Moffatt, Neuberger Berman
Throughout much of the world, auto market prospects appear sluggish. In the US, auto sales are moving back to normalised replacement demand levels, implying slowing growth. In Europe, sales are being held back by a choppy economic recovery. China, in our view, presents a different story. Despite near-term concerns about the country’s slowing GDP growth and slipping consumer confidence, we are bullish on the long-term growth prospects of Chinese autos.
The Chinese auto market went through a rapid growth spurt from 2005-2010, growing nearly six-fold in six years, from 2.5m units in 2004 to 13.75m units in 2010. This unprecedented 35 per cent compounded annual growth rate has since slowed to roughly 9 per cent, but with nearly 18m cars sold in 2013, China has displaced both the U.S. and Western Europe as the world’s largest auto market (see chart below). Read more
The late Hugo Chávez once rubbished Citgo as a “bad business”. But the US refining unit of PDVSA, Venezuela’s state oil group, may now be coming to the rescue of its socialist owners in Caracas, and in a thoroughly capitalist way.
Venezuela is in deep recession, its citizens are struggling to buy food and the government is struggling to meet debt commitments of at least $10bn this year. Step forward Citgo, which is reportedly preparing to issue $2.5bn in loans and bonds to raise some much-needed cash for its embattled parent company, and hence its embattled sovereign. Read more
By Joy K Gallup of Paul Hastings
A year ago, the reforms of Mexico’s restructuring law for financially distressed companies were just taking effect. Most practitioners felt the changes addressed many of the flaws in the existing bankruptcy or concurso process. One year later, the new restructuring law is again in the spotlight, as the three largest bankruptcies currently before the courts are proving terrible test cases for the revised law and highlighting where further improvements are needed. Read more
Shortages in Venezuela are leading to unrest and worrying bond markets. Russ Dallen, head of Caracas Capital Markets, explains that policy failures have reduced production capacity and the country cannot afford to import or pay its debts.
By Taras Kuzio of the University of Alberta
The escalating hostilities around Donetsk airport, already dubbed Europe’s new Stalingrad, could lead to the first full-scale war between European countries since World War II. In the event that the fighting escalates, Petro Poroshenko, Ukraine’s president, has prepared a decree that would institute a state of emergency as a prelude to moving from an anti-terrorist operation to a state of war. Eighty per cent of Ukrainians already believe their county is at war with Russia. Read more
** FT News **
* Turkey cuts benchmark rate by 50 points | Move seen as concession to president Recep Tayyip Erdogan
* Gold rises to $1,300 on haven demand | Market expects ECB package of bond-buying to lower yields Read more
By Costanza Gallo, TEDxRoma
Internet penetration in Africa is transforming business and society – as well as enabling the fight against diseases such as Ebola – at vastly different speeds across the continent. The infographic below provides an at-a-glance view of which countries are making the biggest strides.
In the three years from 2010 to 2013, there has been a marked rise in the number of people who enjoy access to the cybersphere, according to data compiled by the World Bank. South Africa’s Internet penetration, for instance, increased from 24 per cent to 49 per cent, ranking 3rd in Africa after Morocco and Egypt. Read more